U.S. commercial banks and savings institutions had a blockbuster third quarter, reporting a 13% rise in net income, as loan growth and higher interest income produced the largest-ever nominal quarterly profit recorded by the Federal Deposit Insurance Corp.
The 5,980 FDIC-insured institutions earned $45.6 billion in the third quarter, a $5.2 billion increase from the same period a year ago, the FDIC said in its quarterly report on the health of the banking system. It was also a slight increase from the $43.6 billion earned in the second quarter.
"Revenue and net income rose from a year ago, loan balances increased, asset quality improved, and the number of unprofitable banks and 'problem banks' continued to fall," FDIC chairman Martin Gruenberg said. "Community banks also reported solid results for the quarter with strong income, revenue and loan growth."
Loan and lease balances at U.S. institutions grew by $112 billion during the third quarter, slower than the $182 billion increase reported for the second quarter.
Low interest rates for an extended period have prompted some institutions to reach for yield, increasing their exposure to "interest risk, liquidity risk and credit risk," Gruenberg said.
The current level of oil and gas prices also continues to take a toll on borrowers that depend on the energy sector, according to Gruenberg.
Banks set aside $11.4 billion in loan-loss provisions in the third quarter, $2.9 billion more than in the year-earlier period. In the second quarter, they set aside $11.8 billion.
Dallas, Texas-based Comerica (CMA) has come under shareholder pressure after being hit by energy-loan losses. Faced with mounting shareholder concerns, the lender announced plans to cut costs.